The High Court of Andhra Pradesh allowed an appeal filed under Section 482 CrPC seeking to quash proceedings initiated by the magistrate for the offences under Sections 138 and 142 of the NI Act, 1881. The court ruled that under Section 141 of the NI Act, criminal liability for bouncing a cheque is primarily for juristic persons like companies, firms, or associations, and it does not extend to a sole proprietorship concern, as it lacks separate legal identity, precluding vicarious liability for its employees.
Brief Facts:
The petitioner, also accused No. 2 is the manager/Authorized signatory of the sole proprietorship, and Accused No. 1 is the sole proprietor of the company. Respondent/ Complainant supplied rice worth about Rs. 18,00,000. Accused No. 1 issued an acknowledgement to that and issued cheques. The cheques were returned with an endorsement of “insufficient funds”. The complainant laid a private complaint before the court under Section 200 of CrPC and the magistrate took cognizance of the offences punishable under Sections 138 and 141 of the NI Act against the petitioner. Thus, the petitioner filed these criminal petitions seeking to quash the proceedings against him.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the petitioner contended that all the criminal cases registered against the petitioner are not maintainable as he is not a signatory to the cheques that were dishonoured. It was further contended that Accused No. 1 is the sole proprietor of sole trading concern, the question of vicarious liability against the petitioner doesn’t arise to attract Section 141 of the N.I. Act.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent contended that there is ample material against the petitioner to attract the offences under Sections 138 and 141 of the NI Act. Thus, the question of quashment of the case against the petitioner doesn’t arise.
Observations of the court:
The court observed that Section 141 of the NI Act indicates its primary ingredient to establish that the commission of an offence under Section 138 is by a juristic person i.e., a company, firm, or association of individuals. This provision in its all its clauses places “deemed” liability and the exercise of section 141(1) is to find out and fix liability on the person/s whose conduct resulted in the bouncing of the cheque and carves out the situations wherein the criminal liability would not be fastened, to avoid undue harassment to such persons. Section 141(2) paints the larger picture in fastening criminal liability as it includes the concepts of ‘consent’, ‘connivance’ ‘neglect’ of various categories of officers like director, manager, secretary, or other officer of the company.
The court further observed that Section 138 of the NI Act, makes it clear that the attribution of the liability to the person who draws the cheque from an account maintained by him for discharge of his debt or other liability. Section 138 of the NI Act does not speak about joint liability. Even in the case of joint liability, in the case of individual persons, a person other than the person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the N.I. Act. Primarily, on this interpretation, liability cannot be maintained on the Petitioner.
The court held that a sole proprietorship concern cannot be brought within the ambit of Section 141 of the N.I. Act. A sole proprietorship concern possesses no separate legal identity on its own and is merely a business name of the proprietor and any reference made to the proprietorship firm means and includes the proprietor and any reference made to the proprietor, includes such concern. The court stated that vicarious liability cannot be attached to the employees of the sole proprietor concern, vide Section 141.
The decision of the Court:
The court allowed the petition.
Case Title: X vs. Y
Coram: Hon’ble Mrs. Justice Venkata Jyothirmai Pratapa
Case No.: Criminal Petition Nos. 564, 566, 569, and 572 of 2020
Advocate for the Petitioner: Mr. V.R. Reddy Kovvuri
Advocate for the Respondent: Ms. Prasanna Lakshmi
Read Judgment @LatestLaws.com
Picture Source :
